Managing Fraud Risk: A Practical Guide for Directors and Managers

The Fraud Risk Management Framework

Introduction

This framework is a very simple and powerful way of demonstrating the key components of fraud risk management architecture. It is neatly summarised in Diagram 1.2. I like to take my delegates through the framework in the following way, always starting by pointing to the box at the bottom of the diagram headed “Investigation” and telling them a little of my early experiences as an international fraud investigator. There are five stages in my description to the delegates, as follows:

Diagram 1.2 Fraud Risk Management Framework

1. Overview of the Framework

I first started working in the forensic and fraud auditing area in the early 1990s. At that time very few businesses in the UK had anything approximating to a fraud risk management programme. Most directors and managers that I spoke to at the time refused to admit that fraud was a problem at all, with a typical attitude being: there has never been any fraud in our business, our people are honest and we trust them. It was very frustrating at times. I remember when I was in forensics at Touche Ross trying to pitch an anti-fraud risk profiling product that we were working on to the Finance Director of a travel company and being told: “that's quite interesting, but what has it to do with us? We do not have any fraud in our business.” Just as he was saying this, his secretary came in with ...